Filing for bankruptcy is not a bad thing. It gives you an opportunity to relinquish some (or all) of your debts and make your way toward a fresh start. But which chapter of bankruptcy is right for you?
There are six chapters of bankruptcy. Although each of them shares a common goal, the requirements are different for each. Chapter 7 is the most common form of bankruptcy, and it is also known as the “liquidation” chapter. While it allows you to quickly discharge certain debts, it also requires you to sell some of your non-exempt assets.
Continue reading to learn more about the pros and cons of Chapter 7 bankruptcy in Florida and what it could mean for your financial situation.
Explaining the Pros of Chapter 7 Bankruptcy
Bankruptcy does not mean that you are “broke.” Instead, it means that your debts outweigh your assets. In Chapter 7 bankruptcy, you can pay off your creditors by selling your non-exempt assets, which include:
- Your second residence
- A second vehicle that you own
- Your personal belongings, like jewelry, collections, and other valuable items
You can usually keep one vehicle, your house, and various insurance policies that you have.
Pro: You Can Discharge Most of Your Debts
The Florida Bar says that you can discharge most of your debts if you qualify for Chapter 7 bankruptcy. This means that creditors cannot ask you for money, and you are not obligated to pay back certain things.
Pro: Chapter 7 Bankruptcy is a Relatively Fast Process
You want a fresh financial start, and you want it now. If you qualify for Chapter 7 bankruptcy, it will only take a few months to complete. This is different from other filing chapters, which take anywhere from three to five years to resolve.
Pro: Chapter 7 Frees You from Future Obligations
When your assets have been liquidated, and you have a steady financial foothold, your debtors are not allowed to take your income or ask you for more money. The money you start earning after your case is over remains with you; it does not go toward any unpaid debts.
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The Cons of Filing for Chapter 7 Bankruptcy
Although there are many benefits to filing under Chapter 7 bankruptcy, it is not for everyone. You might benefit from another filing Chapter (like Chapter 13), depending on your situation.
Here are some cons to filing for Chapter 7 bankruptcy in Florida:
Con: You Can Only File as an Individual
Chapter 7 bankruptcy does not apply to businesses or organizations. It pertains to individuals and married couples. In some cases, spouses may even need to file separate cases.
Con: Chapter 7 Bankruptcy does not Discharge All of Your Debts
Per the Florida Bar, Chapter 7 bankruptcy does not discharge the following:
- Child support payments
- Some student debt
- Debts you incurred after filing for bankruptcy
- Criminal fines
- Most taxes
This chapter also does not ensure that your co-signers do not have to pay off loans or debts, either.
Con: You Might not Pass the “Means” Test
To determine whether you are eligible for this filing, you must pass something called a means test. Per the United States Bankruptcy Court, this test considers your dependents, transportation expenses, and other information about your finances.
There are strict qualifications for whether you can file for Chapter 7 bankruptcy. If you do not “pass” the means test, you might have to file for Chapter 13 bankruptcy.
Con: Filing for Chapter 7 Bankruptcy is Public Record
Once your case is resolved, the fact that you filed for bankruptcy will be accessible by anyone who wants to know. This could include future employers, investors, partners, and businesspeople.
While there is no shame in filing for bankruptcy, doing so could harm your future business prospects and impede your ability to secure loans.
Our Law Firm Can Determine what Chapter of Bankruptcy is Right for You
Filing for bankruptcy is stressful. While trying to stay on top of your finances, going through the filing process can quickly become a time-consuming endeavor. Yet, with our team managing your case, you only have to look forward to getting a clean slate.
We can:
- Determine which filing chapter applies to your situation
- Gather the documentation we need to file your case
- Manage communications with your creditors
- Explain your legal options
- Represent you at any meetings
There’s a lot of bureaucratic red tape and protocols that go into filing for bankruptcy. You don’t have to worry about it, though. Your bankruptcy lawyer in Florida can manage all of it for you.
Call Bogin, Munns & Munns to Learn More
You are just one phone call away from being free of debt. You can discuss the pros and cons of filing for Chapter 7 bankruptcy in Florida with our team. Reach out to our team so we can get to work on your case.
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